THE Court of Tax Appeal (CTA) has upheld the cancellation of the tax on EDS Manufacturing, Inc. for fiscal year 2010 worth 223.8 million pesos, including interest and penalties.
In a 12-page ruling on April 26, CTA en banc said the internal revenue commissioner’s (IRC) review petition was unfounded because the revenue officers who undertook the review of the books of accounts of the company did not have a letter of authorization, or LOA.
“To be specific, except where the petitioner himself, or BIR (Bureau of Internal Revenue) officials duly authorized by law or the petitioner conducting the taxpayer review, the issuance of a valid LOA by the petitioner or his duly authorized representatives in favor of tax officials performing assessment functions is a prerequisite for the validity of their examination and tax assessment,” according to a copy of the decision written by the associate judge of the CTA, Marian Ivy F. Reyes-Fajardo.
The Divisional Court earlier allowed the manufacturing company’s appeal to vacate the assessment due to the lack of an authorization letter.
The petitioner is the CIR, which has the power to decide, cancel and reduce the tax obligations provided by the tax code of the country.
The respondent is a company that manufactures and supplies electrical wiring harnesses, battery cables and other electrical components.
The CIR argued that the divisional court failed to consider the assignment protocol, which the official said established the proper authority of tax officials to review the books of accounts.
The company pointed out that the CIR’s recourse to the mission brief is unfounded since the documents were not identified by a competent witness. He added that these might not be a valid source for authorizing revenue officers to legally audit a taxpayer.
The Tax Court agreed with the respondent, holding that the issuance of a protocol of assignment is not a substitute for a letter of authorization.
“Specifically, it was found that the respective signatories thereof are BIR staff members without authority to issue an LOA,” the tax tribunal noted, citing the signatories of the assignment protocol.
The Divisional Court previously denied admission of the memorandum because the evidence was supported by a competent witness.
“The petitioner did not make a tender of evidence or tender of excluded evidence for these refused documentary exhibits,” the CTA full tribunal said. — John Victor D. Ordonez